TOP 10 TIPS

Putting away 10 per cent of your current income (aside from that already put into superannuation) will through the benefit of compound interest, regular investment and good financial behaviour of not spending more than you earn may result in a passive income stream or ability to earn income while you sleep.

Timing the stock market is impossible. Even the most experienced analysts have great difficulty determining whether the market is at the very top or bottom of the economic cycle. That’s why drip feeding money into the market via an investment plan makes so much sense.

Many people forget that the most important asset they will ever have is their ability to earn an income. Without an income we cannot pay down debt, we cannot set up a passive income stream, we cannot save for our retirement. We cannot live!

You naturally insure property, artwork, cars and the like – don’t forget to insure yourself, just in case you can’t work due to illness, accident or injury.

Super is an investment. It’s typically the biggest investment you will ever have, apart from your home, so treat it as one. Remember it is a long-term investment, so don’t worry too much if the value moves up and down with the markets. Check how much difference adding a little more each week to your super account will enhance your retirement balance.

Your money has to last you a very long time. Your investment strategies need to reflect the length of time your money will be invested. Long-term means long-term – an investment in superannuation, for example, typically lasts for up to 40 years in accumulation phase and 20 years or more in retirement. Keep this in mind when looking at long-term averages. Don’t sweat the small stuff, make sure the long-term goals remain on track and don’t panic about short-term movements.

The best investment advice you could give anyone is to start early. Make your money start working for you as soon as possible. It has been shown that investing early can mean that even if you stop contributing money to your investment after just a few years you can still enjoy a balance higher than if you saved more each year for a longer time later in life. This is due to the effect of compound interest and time.

This is an oldie but a goodie – spread your investments around. Why? Because if one investment goes bad it won’t hurt so much. Too many people have all their money invested in too few assets which means that when something goes wrong, they suffer big losses. If you have a well-diversified portfolio, made up of different types of assets, then chances are that while one might not be doing so well, others will be.

Past performance is no guarantee of future performance. This is the written disclaimer that accompanies almost all financial planning products. Keep this in mind when investing. This is because markets change and investments are cyclical in their relative strengths and the investment styles which may have achieved best results last year may in fact be amongst the worst this year.

Rich people buy luxuries last; the poor and middle class often buy luxuries such as big houses, diamonds, furs, jewellery or boats because they want to look rich. They look rich but they get deeper in debt on credit. The real rich build their assets first and use the income they generate from these assets to buy luxuries.